So you’re ready for a new car or motorcycle. But what if your credit is less than perfect? Not to worry. You should still be able to get a loan. It won’t be as easy as if you had great credit, and it may cost you more, but it can be done. You should definitely know what you’re getting into when you get started.
Of course a missed payment is worse than a late one, and a bankruptcy is probably the worst thing you could do to your credit. Most things stay on your credit report for 3 years, while some, including bankruptcy, stay on for 7 or 10 years. Even if an item is on your credit report, some lenders will disregard it if it’s older than 3 years.
If you haven’t already done so, get a copy of your credit report. You can get it for free by contacting the three major credit reporting agencies, Equifax, Experian, and Transunion. You can also pay a third party to do it for you, but that’s money you don’t need to spend. Take a look at the problem areas and determine how old they are. If you have something that’s 2 years and 10 months old, it might be worth it to wait 2 months to buy that new car or motorcycle.
Next you need to start rebuilding your credit. Make sure to pay all of your bills on time. Pay down your credit cards. Close all of your credit card accounts except a few for convenience. Buying that new car or motorcycle will give you a great opportunity to prove that you are credit worthy. You’re borrowing a relatively small amount, and it’s usually easier to get a car loan than it is to get a mortgage or other large loan. Also, dealers want to make you the loan in order to sell the car or motorcycle.
Some lenders will offer you a loan with a very high interest rate, and tell you that’s the best rate you can get. Don’t take them at their word. Do your research. Apply for a loan with your bank or credit union. Some banks specialize in loans to people with imperfect credit. They’re likely to give you a better rate than the dealership would. Even if they don’t, you can ask what the interest rate would be if your credit report was just a little bit better. Use this number to compare against the interest rate the dealership is charging. Better yet, talk to two or three banks and compare rates.
Make very sure that your loan agreement is finalized before you drive off the lot. If your loan is subject to final approval, the lender could increase your interest rate. A verbal financing arrangement is not good enough.
If you go into negotiation knowing what your credit score is and what kind of rate to expect, you should be able to get the car or motorcycle of your dreams without being taken advantage of.
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